Xcel Energy is asking the courts to undo Boulder's recent formation of a municipal power utility.

The Boulder City Council voted unanimously May 6 to form an energy utility, even though the city has not yet filed for condemnation and officials have said repeatedly they have not made a final decision on whether the city will provide electric service.

According to the lawsuit filed Tuesday in Boulder District Court, Xcel said the utility formation was "premature" and Boulder failed to meet the charter requirements that it demonstrate it can offer electric service at similar or lower rates to Xcel, with similar or better reliability, while offering much greener power that reduces greenhouse gas emissions.

The Boulder City Council voted 6-3 last summer that it had met those requirements, but Xcel said those findings rely on one configuration of the utility that depends on the Colorado Public Utilities Commission signing off on the city's plans prior to condemnation, something that is by no means guaranteed.

The lawsuit names the city of Boulder and the City Council members individually.

"City Council's action forming a utility now — without knowing what customers any City utility may legally serve or the proposed scope of any such system — gets the process backward, and risks causing permanent and irreparable injury to Public Service," Xcel's attorneys wrote in the filing.

Xcel said the city first needs to determine exactly which assets it can acquire and how the system will be separated from Xcel's. In addition to power lines and substations inside city limits, Boulder wants two substations outside the city that serve city and county customers and a high-voltage transmission line that circles the city. The city's projections on cost, rates and reliability all depend on Boulder owning those pieces of the system.

However, the PUC has ruled that Boulder needs its permission to condemn assets outside city limits, a decision the city is appealing. Without knowing the outcome of either the city's appeal or a PUC ruling on the city's separation plan, Boulder cannot be sure it has met the charter metrics, Xcel said.

There is a "real risk that Public Service's assets will be taken by the City without Council ever demonstrating that it actually can satisfy the voter-mandated limitations set forth in the City's Charter based on the utility Council actually proposes to operate, which currently is unknown," Xcel said in the lawsuit.

"When the city learned of Xcel's plans to file this complaint last week, the city offered to enter into an agreement to extend the company's time to file on the condition that Xcel negotiate in good faith for the transfer of its assets," he said in an email. "Xcel refused even to consider such a proposal and instead insisted on an unlimited extension with no benefit to the city whatsoever."

Xcel spokeswoman Michelle Aguayo said the city left the company with no alternative to filing litigation.

"We have voiced our concerns to the City of Boulder on multiple occasions, and tried to find an alternative to litigation," she said in an email. "We proposed an agreement that would hold off any litigation, but the City informed us that it did not see a benefit in our proposal. This has required us to pursue legal action now, in order to preserve our rights."

Boulder City Attorney Tom Carr and Nadia El Mallakh, Xcel assistant general counsel, exchanged a series of letters starting May 27 in which Xcel sought a "tolling agreement" that would preserve Xcel's right to object to the utility formation in the future without filing litigation now. Boulder responded that the city needed a response to its "good-faith offer" to buy Xcel's Boulder distribution system.

Good-faith negotiations to buy property is a necessary precursor to filing for condemnation.

"The letter does not offer anything to the City as far as I can tell, and it seeks an unlimited extension of Xcel Energy's time to object to the City's utility formation ordinance," Carr wrote. "An offer generally involves more than an agreement not to sue."

Carr also wrote that the city does not believe the issues Xcel raised about the utility formation have any relevance to the condemnation proceedings, which should focus on the cost of the system.

Xcel has not disputed Boulder's right to form a utility, though it has challenged, through the PUC, Boulder's right to take assets and customers outside city limits.

El Mallakh responded that Xcel wants to maintain the status quo without filing litigation, and the company could not accept Boulder's conditions.

In the lawsuit, Xcel calls the utility formation "illegal" and asks the court to find it to be "null, void and of no effect" and require the city to postpone utility formation until it can meet the charter requirements.

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